Facility Management 2012: Is the Budget Free-Fall Over?

01/04/2012 | By Janelle Penny

Facility managers are cautiously optimistic about the possibilities and potential of 2012.

What are you doing to keep up?

This question is paramount for facilities managers this year. The years of recession-fueled budget cuts have slowed, if not stopped, and many FMs look at 2012 as a chance to further streamline operations while resuming deferred maintenance and other projects.

Is the Budget Free-Fall Over? Compared to last year, respondents paint a slightly rosier picture of 2012’s economic outlook while maintaining a sense of uncertainty about what the following years will bring. About 24% say their maintenance budget will decrease for 2012 (35% of last year’s respondents said the same) and another 57% will face the same budget as they did in 2011, when 43% predicted no change for the upcoming year.

“Utility costs will be up, as well as repairs due to aging infrastructure,” predicts one respondent. “Construction is on hold, so the budget will not significantly increase.”

The state of many respondents’ funding coupled with a rise in costs for many aspects of building operation – for example, materials and supplies, which are expected to rise for 74% of respondents – presents a challenge for FMs this year too. However, many are attempting to mitigate the damage by finding creative ways to cut costs wherever they can.

Richard Storlie, the director of administrative services, facilities management, at the University of Nevada Las Vegas, faced a 26% reduction in his department’s staffing budget and another 6% for materials and supplies due to steep cuts to Nevada’s higher education funding. Through a combination of retirements, choosing not to fill open positions, and one layoff, the department was able to absorb the staffing cuts.

“It’s a mixed bag right now,” Storlie says of the fluctuating balance between the FM department’s costs and resources. “Our contract price for small construction jobs is down, but the cost for materials has gone up about 10%. We’re going to see that more in the near future too. There were 64 positions cut, which means 64 employees who are not using materials. We’ve been able to absorb some of the cost increases based on the lack of people doing the work, but that shakes out to deferred maintenance.”

Capital budgets faced a similar fate. Fewer respondents predict a decrease – 28% for 2012, as opposed to 33% in 2011 – but 45% predict no change, up from last year’s total of 39%. Compared to last year’s response, it appears that more FM budgets have stabilized, but they’re not yet returning to their pre-recession levels and may not for some time.

One possible cause for this, Storlie theorizes, is that with the recent emphasis on doing more with less, organizations are less likely to start new initiatives requiring considerable upfront costs unless the payback period is short.

“There was a big influx of money from federal programs and the state for green initiatives, so budgets were artificially inflated,” Storlie explains. “We don’t believe that will be coming again. We presented our list of projects we’d like to fund for energy or sustainability, but we’ve hit most of our low-hanging fruit, so we’re now up into the 7- to 9-year payback range. That’s a long return on your money.”

Working Smarter
With budget uncertainty still dominating FMs’ decision-making, many organizations are choosing to focus on streamlining operations to use dollars more efficiently. At Toyota Motor Sales USA, the facilities operations department constantly looks for opportunities to trim their costs without sacrificing service.

“It’s about trying to provide the best value for the company,” explains facilities operations manager Mark Yamauchi. “We call it kaizen – continuous improvement. The company’s becoming more efficient, and as such, our facilities need to keep up. For example, we realized that we’re traveling all the time, so do we really need as much space as we have historically? We’ll have some initiatives starting up that allow us to look at being more efficient with space use.”

This proactive approach is vital to proving the FM department’s value as a business unit instead of a cost center, agrees Larry Zitzow, director of facilities management at the University of North Dakota. Zitzow approaches projects with total lifecycle costs in mind, looking for opportunities to save the university money over the long term with minimal capital input in the short term.

“You have to be smarter, and you have to be out looking at things,” Zitzow explains. “I’m buying some hand dryers for the restrooms – right now, we have paper towels. When I see what paper towels actually cost me per bathroom and what an electric hand dryer can save me, I’m moving toward hand dryers – I buy it and I’m good to go for several years. We’re also changing to induction for the whole campus’s outside lighting. I won’t have to change that light bulb for 10 to 20 years, which is a huge savings.”

Look for ways to connect with vendors and industry associations to keep abreast of new developments, Zitzow adds. He counts the EPA, APPA, and regular vendors as vital sources for information.

“It’s about knowing where to go,” Zitzow explains. “I’ve been in this business for 38 years, but the last five have probably been the most enjoyable because there’s so much opportunity today to get involved and see the changes. In previous years, very little changed – we were just putting out fires because the campus was growing. We’re still growing, but now we’re growing smarter.”

FMs must become outspoken advocates for their department’s role in their organization to provide a clearer picture of the department’s value, demonstrating the need for adequate funding. Storlie’s department meticulously laid out each of its responsibilities and how much each task costs to perform, which allows them to negotiate when funding is cut or extra services are requested.

“It’s zero-based budgeting, so to speak,” Storlie explains. “Because we’ve laid out that responsibility matrix, we’re in a position to say ‘If you’re going to cut us by 10%, what services that we provide are you going to reduce to balance that?’ instead of absorbing it.”

A Continued Focus on Sustainability
Despite the still-shaky economy, 40% say their organizations plan to dedicate more money to sustainability initiatives this year, and another 52% will maintain the same level as last year. Energy management projects were the most common goal for 2012, with 44% of respondents planning to tackle them this year and another 22% that have already implemented such initiatives within the last two years.

From LEED requirements to green certified products, FMs continue to pursue sustainable ways to manage buildings without incurring extra costs. At the Louisville, KY, headquarters of Kindred Healthcare, a post-acute care provider with facilities in 46 states, a 4% hike in the cost of electricity threatened to increase the 300,000-square-foot building’s already high energy costs, which range around $1.1 million per year due to a lack of natural gas access and a centralized data center supporting Kindred’s other facilities.

Stephanie Warren, Kindred’s senior director of corporate facility management, opted to phase in high-efficiency measures as the 20-year-old building’s original equipment began to wear out. All of the facility’s 16 air handlers ran at full power all day, but none had variable frequency drives. Installing VFDs in August 2011 has already saved the company about 3 million kWh. Turning the data center’s drop ceiling into a return air plenum in October eliminated hot spots and helped lower the area’s energy use. These and other projects kept the building’s energy costs relatively flat despite the rate increase.

“Look for partners in your community – affordable, good partners who can help you evaluate your current energy status. We engage with local partners to do everything we can,” Warren says. “We also hired a sustainability company to assist us. You’ve got to have help. We did a lot of talking to other people and found a company that has more than helped us pay back what we paid them in consulting costs. Don’t be afraid to communicate what you’re trying to do.”

As with lifecycle costs, today’s pursuit of sustainable choices is about more than reducing a building’s carbon footprint. Framing sustainability projects in terms of dollars and cents not only benefits the environment, it also affords facilities managers an easier way to justify spending on green projects.

“With everything you do, there are opportunities to do better from a sustainability standpoint,” Yamauchi says. “When you look at sustainability from a long-term view, it’s an investment in the future. It will save the company money in the long run. That’s how to be proactive – identifying corporate needs before they’re brought to you, maybe before the corporation realizes it. They’re rightly focused on projects and services. It’s the facilities manager’s job to focus on the built environment.”

Moving Forward with
Education
The economy will eventually stabilize, but the wise FM must look farther than 2012. The wave of baby boomers approaching retirement will remove many experienced senior FMs from the industry, and stagnant staffing and training budgets have left a gap in age and/or skills in many organizations.

“We see an upcoming shortage of good technicians, people that can diagnose and repair our building systems,” Yamauchi says. “It’s not unlike the challenges in the automotive industry in being able to support servicing of vehicles. Buildings are making quantum leaps with the incorporation of technology.”

More advanced training to get staff up to speed is necessary, respondents agree, but so is boosting interest in facilities management careers and offering more degree programs in facilities management. This will ensure that prospective FMs are well-rounded when they enter the field.

“Buildings are much more sophisticated these days, and our occupants expect more,” says Steve Fugarazzo, director of facilities engineering for integrated defense systems at Raytheon Company. “With proper training, people are equipped to handle it. More personal mentoring from industry groups such as IFMA would be extremely valuable.”

Internal training is also high on the priority list for some of this year’s respondents, with 23% naming staff skills as a major obstacle they’ll need to overcome in the next few years.

“When I see the next generation coming, they’re much more in tune to training. They want to see a way of moving forward, and they want to know where they can get,” Zitzow says. “You’re not going to get people who have as much experience as the staff I’ve got today. You’re going to have to train them and have people who are willing to learn new techniques and actually carry them forward.”

One way to beef up your staff’s training is to actively pursue partnerships with suppliers who offer tutorials on new products, which keeps your staff up to date on what the market has to offer, Zitzow adds. “We’ll have a luncheon where they come in and provide a presentation to explain how a geothermal system works, a specific ventilation system, or a product they have and how and where it can be used. I’ll have 12 to 14 people in that room hearing the same thing.”

This sort of creative workaround will continue to be the name of the game for the foreseeable future, Zitzow says. The economy has far to go before the funding outlook turns positive for many of this year’s respondents, whose optimism is cautious at best.

“There will be a huge continuation of doing more with less,” Zitzow explains. “How can you economize? How can you save dollars? I think you’re going to start seeing a decrease in the inventory of some campuses because deferred maintenance is going to continue to grow, and the dollars that will come back to pay for that deferred maintenance will continue to decrease. The economy’s going to be stable if anything – it isn’t going to increase much. It’s going to be a very tough few years.”